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Bloomberg MILAN (Bloomberg) – Fiat Chrysler Automobiles NV has proposed a merger with Renault SA to create the world's third largest automaker, as automakers scramble to wreck the cost of electrification and driving autonomous.
The operation would be structured as a 50/50 stake through a Dutch holding company, Fiat announced on Monday. Renault shareholders, including the French government, would receive an implicit premium of around 10%. In a separate statement, Renault's board of directors announced that it would look forward to the "friendly" proposal.
The automakers are advancing without the partner of Renault for 20 years, Nissan Motor Co., and Mitsubishi Motors Corp., the other member of their alliance.
The outlines of the transaction would make Exor NV, the founding company of the Agnelli family, the main shareholder of the merged entity. Fiat chairman John Elkann is likely to remain in office, while Renault chairman Jean-Dominique Senard is said to be the managing director, according to people close to the deal who have refused to be named.
Together, their combined market value was about 35 billion euros (39 billion dollars).
The talks come as carmakers around the world face intense pressure to invest heavily in new technologies and adapt to trends such as carpooling. Falling sales in the world's largest markets – China, the United States and Europe – have brought a new urgency to consolidation. Fiat and Renault anticipate that their annual joint "synergies" will rise to more than 5 billion euros, notably from purchasing power.
"Fiat and Renault are looking for greater stability by growing, this is not a bad idea for mainstream manufacturers," said Juergen Pieper, an badyst at Bankhaus Metzler. "The execution of the agreement is a major obstacle. But on paper, this proposal seems good. "
The plan enjoys political support from the French state, Renault's largest shareholder. Finance Minister Bruno Le Maire met with Senard last week to discuss the proposal, government spokeswoman Sibeth Ndiaye told BFM on Monday.
"We need industrial giants in Europe" to compete globally, she said. "It is obvious that we must see the conditions" of the agreement, to ensure that it would be favorable to the development of Renault and its employees.
Having heard the news of this rapprochement, Italian Deputy Prime Minister Matteo Salvini, who vehemently opposed the French President Emmanuel Macron, quickly referred to Italy's "national interest" and "the national interest". let slip the option of the Rome government.
Italy will ensure "that the historic value of Fiat is guaranteed, otherwise we will intervene," Claudio Borghi, head of the Lower House Budget Committee, told La7, adding that the state could take equal participation in Fiat Holding French in Renault.
Fiat and Renault have experienced upheavals at the top last year after the death of former Fiat head Sergio Marchionne, and the arrest of Carlos Ghosn, president of the Franco-Allied alliance. Japanese, in Tokyo for financial crimes.
The withdrawal of Ghosn from the head of the Franco-Japanese partnership has fueled tensions on the surface, while Nissan rejected so far a French attempt at merger. Fiat has conditioned its own merger talks with Renault at the French automaker, agreeing not to pursue a deal with Nissan in the near term, said the people. If the contract between Renault and Fiat was concluded, Nissan would be bound to the new entity by deeply integrated activities and cross-shareholdings with the French manufacturer.
Together, Fiat and Renault produced nearly 8.7 million cars last year, which would allow them to defeat the South Korean group Hyundai Motor Group and the American group General Motors Co. of Detroit. 10 million vehicles last year.
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